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Last Updated: Saturday, 16 April, 2005, 13:15 GMT 14:15 UK
Government orders Rover inquiry
Rover banner at Longbridge
Redundancy notices have been sent to 5,000 employees
The government has ordered a formal investigation into the accounts of MG Rover and its owner, as 5,000 workers await their redundancy notices.

The regulatory Financial Reporting Council will look at how Phoenix Venture Holdings has used 450m left to it when it took over from BMW in 2000.

Workers have been angered by the money made from MG Rover by directors.

Opposition parties are calling for a full independent inquiry into the car-maker's collapse.

Unions cautiously welcomed the government's announcement, but stressed their major concern was the welfare of those facing redundancy.

Investigation

The end for MG Rover was signalled when China's Shanghai Automotive Industries Corporation pulled out of a possible rescue deal last week.

Tory spokeswoman Caroline Spelman told BBC Radio 4's Today there was a need to understand what had gone on behind the negotiation process aimed at saving the 400-acre site at Longbridge, in the West Midlands, over the past few years.

"The Department of Trade and Industry were very supportive of the Phoenix bid over alternatives and also were involved behind the scenes in the negotiations between the Chinese company and Rover," she told BBC Radio 4.

Liberal Democrat spokesman Malcolm Bruce said Phoenix had "squandered" the money.

"The point is why didn't they use the time and money in the early stages to secure the long-term future, rather than fritter it away," he said.

Although this is a very sad day, I firmly believe it will be a day of rebirth rather than one of death
Digby Jones, Director general, Confederation of British Industry

He added: "The difficulty about the government organising an inquiry is that there are questions that need to be asked of government as well, so it needs to be at arm's length."

Trade and Industry Secretary Patricia Hewitt said on Saturday she had requested a formal investigation by the independent financial regulator, the Financial Reporting Council.

"Yesterday I asked Sir Bryan Nicholson, who is chair, to investigate the accounts of MG Rover and all its associated companies over the last five years so we can that find out what has happened to the money," she said.

She suggested company directors had a "moral obligation" to put money towards helping the workers.

Ms Hewitt said workers were feeling "pretty sick" that the directors had made a lot of money out of the company.

"Where entrepreneurs take a risk they should be entitled to big rewards for big success. But that is not what we are talking about here.

"They did not put up huge amounts of money, the company has not been a success and it was virtually given to them by BMW."

Worker at Longbridge
A Longbridge worker contemplates the future

The Transport and General Workers Union said it wanted to secure good redundancy payments for staff.

"We welcome the holding of an investigation, but clearly it is not going to make any immediate difference to the prospects of our members," a spokesman said.

"We are working on the scale of redundancy payments and the speed at which they are being paid."

Of the workers at Longbridge, around 1,000 are being retained to complete work on unfinished cars, but more redundancies could follow.

The government has announced a 150m support package for those losing their jobs and for an estimated 12,500 people in affected subsidiary firms.

'Day of rebirth'

Chancellor Gordon Brown said the package would include more than 60m to help diversify industry in the area and to support MG Rover's supply chain, plus 50m to fund retraining of workers made redundant and 40m ploughed into statutory redundancy payments.

He said every Longbridge worker would be interviewed over the next week to be told about retraining opportunities and details of 26,000 job vacancies in the West Midlands.

But Eric McDonald, of the Transport and General Workers Union, said: "We certainly don't think [the funds] will be sufficient to help with the cost of training and retraining."

Sir Digby Jones, director general of the Confederation of British Industry, said that firms had been ringing him to say they were crying out for skilled workers.

"Although this is a very sad day, I firmly believe it will be a day of rebirth rather than one of death," he said.

Meanwhile, John Moulton of the Alchemy Group, which bid for Rover five years ago, said he had not given up hope of acquiring the MG Sports car brand.

He said there was "a possibility of setting up a new smaller MG business", but said "the first requirement is that the MG brand is available, which is not clear. It may be owned by the holding company it may be owned elsewhere".






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